Market update

VST - Bearish
ST - Bearish
IT - Bullish yet
LT - Bullish yet

For trading, use SPY for $SPX, DIA for $INDU, QQQ for $NDX

$SPX update

My previous update about the market is here . I posted my outlook in all time frames in that post, it is good to know the market is following my outlook since then. We are a mere 13 $SPX points lower compared to Oct. 14th. The market went higher in the very short term and now is going lower.

Before I go to write further, my outlook for the next 2 weeks:

  VST - Bearish

 ST - Bearish still but see signs of + divergence to turn bullish

 IT and LT - Bullish still.

I want to write more about the ST here. Look at the chart below:

Price is going lower vs relative strength is at the same level or higher right now. If this chart should turn bullish, it needs to follow rules: RSI shouldn't go lower than previous low, RSI should turn higher, then buy when price closes above daily close 1417 on the /ES. The same divergence can be seen on the $SPX as well.

There are chances that the divergence may not end up into a bullish tone but watch for the above signs and play the game - good for few days as this is a daily chart.

$SPX update

I was wondering about market correction going on currently, if it is a correction in a bull trend or something serious to take note of. 

Since the June 1st week low of 1274, $SPX rallied ~ 200 pts and topped out in September. There have been 6 minor corrections of 40 - 50 pts along the way. I highlighted them on the graph. All of those corrections didn't exceed more than 40 - 50 pts and maintained consistency. How come there was so much accuracy? This correction is also worth ~ 50 pts so far.There is a difference between the current one and the past 5 corrections in this intermediate trend. None of them tagged the lower bollinger band, the price had a good relative strength (RSI). With these key points in mind, I can conclude that this correction will fall further albeit there may be a bounce into next week because the market is oversold. $COMPX is doing worse than $SPX, $DJI is in a better strength - this is also a sign of coming market weakness. 

Very short term - oversold, looking for bounce

Short term - bearish

Intermediate term - bullish

Long term - bullish by a long way

Stock picks for 10/09/2012

Bullish on CLX, PM, PEG, ETR, GWW

Bearish on MDR, RPM